What is it? Under a gold standard, the monetary unit is defined as a certain amount of gold, like 1/20th of an oz, or 1g. In the era of the international gold standard, before WWI, the US dollar was defined a little less than 1/20th of an oz of gold, so 1 oz roughly was worth $20.67. A silver standard follows the same idea. The British monetary unit, the lb sterling, originally meant just that, 1lb of sterling silver. A gold standard can operate with or without govt in the minting of gold coins, the issuing of gold backed paper currency, and the provision of gold backed checking accounts. Historically private mints and commercial banks were reliable providers of gold denominated monies. Thanks to the banks, that doesn't mean people have to carry around bags of gold coins. Anyone who finds paper and checking accounts more convenient can use those. But it does mean that if a person wants to redeem a banks 20$ bill, or cash it's 20$ check, the bank is obliged to give them a 20$ gold coin. The obligation to redeem for gold guarantees the gold value of all kinds of bank issued currency, and the purchasing power of gold has historically been very stable. By contrast under today's unbacked, or fiat dollar standard, there is no value guarantee. If you take a 20$ federal reserve note to the bank, all you can get for it is other federal reserve notes. The experience of fiat currencies from various countries have ranged from mild inflation to terrible inflation. Why did the US leave the gold standard? [i]Simply bc the gold standard constrained the federal govt.[/i] The obligation to redeem in gold limited money printing at times when the federal govt, rightly or wrongly, thought more money printing would be a good idea. The US went off the gold standard in two major steps. First, in the 1930's under Franklin Roosevelt, the Federal govt broke its promise to redeem federal reserve notes in coin to it's citizens. Private ownership and use of gold coins were actually outlawed. Individuals and banks were ordered to turn in their gold coins and bullion to the federal reserve. In the late 1960's early 70's, the fed printed dollars rapidly. The falling purchasing power of the dollar triggered redemptions by foreign central banks and the US began running out of gold. Rather than stop printing dollars, Nixon ended their redeemability in 1971. The money printing than accelerated culminating double digit inflation in the 80's. By contrast the inflation under the classical gold standard was never in double digits, and averaged between 0% and 1% over long term. A common objection to a gold or silver standard is that there can be random shocks to the supply or demand curves for metal, and these will make the purchasing power of metallic money unstable. But historically this was not much of a problem. For example, after the major supply shock of the CA gold rush of 1849, the resulting inflation was only 1.5% per year over a period of about 8 years. There after the price leveled off, and gradually declined as the world's output of goods grew faster than the stock of gold. Under our current fiat standard, the supply of of money is up to the decisions of the federal open market committee. There is NO self correcting market tendency to prevent the creation of too much money under that system. The fate of the dollar rest with a handful of political appointees. The practical question is, under which system are the quantity and purchasing power more stable? In other words, which system best limits inflation.? The answer of that is clear from the historical record, gold and silver standards have dramatically out performed fiat paper. TL;DR [spoiler]Let me simplify that. Under the gold standard the government has no control of the supply of money and thus cannot devalue the dollar. Under a fiat system the government can control the supply of money and consequently increase the money supply during a recession to lower interest rates and stimulate business investment. Proponents of Keynesian economics favor doing this, for it increases aggregate demand. Proponents of Austrian economics believe that the artificial lowering of the interest rate causes unsustainable spending that causes subsequent recessions.[/spoiler]